The battle is on in the online streaming of videos and other shows, according to my stock analysis.
Yet the main combatants include not only incumbent Netflix, Inc. (NASDAQ/NFLX) but also upstart Amazon.com, Inc. (NASDAQ/AMZN), which in two short years is likely causing some stir at Netflix’s corporate headquarters due to its own video streaming service.
If I was Netflix CEO Reed Hastings, I would be more than worried about the aggressive push of Amazon.com into the video streaming market, based on my stock analysis.
No longer is Amazon.com merely a seller of books and related items, as the company is looking at expanding its business line. My stock analysis suggests this strategy makes a lot of sense, considering that Amazon.com has a significant membership base to draw business from. This is the very real reason why Facebook, Inc. (NASDAQ/FB) needs to monetize its more than one billion users and make money, as my stock analysis indicates. (Read “Facebook Does an About-Face: Set to Move Higher?”)
There is speculation that Amazon.com may have paid as much as $200 million to Viacom Inc. (NASDAQ/VIA) for the rights to show hundreds of shows on its “Amazon Prime Instant Video” streaming service, including those from Nickelodeon, MTV Comedy Central, and others. The move comes after a similar licensing deal between Viacom and Netflix expired. For Amazon.com, it appears to be a great move and hits hard at Netflix. (Source: “Amazon and Viacom reach multiyear licensing deal,” Associated Press, Yahoo! Finance web site, June 4, 2013.)
My stock analysis suggests that Amazon.com has clout, and Netflix better be watching.
With a market cap of $122 billion, Amazon.com is much bigger than Netflix, whose market cap pales in comparison at just less than $13.0 billion.
Sometimes, when a bigger company wants something, it will get it, one way or another, based on my stock analysis.
And while Amazon.com may be behind now, according to my stock analysis, the fact the company has access to its huge membership base is a major advantage over Netflix. According to Morningstar analyst R.J. Hottovy, the Amazon Prime service may have over 10 million members. (Source: Thomas, O., “Amazon Has An Estimated 10 Million Members For Its Surprisingly Profitable Prime Club,” Business Insider, March 11, 2013.) Netflix currently has over 36 million users in 40 countries (source: Netflix, Inc., web site, last accessed June 5, 2013), so it’s ahead of Amazon.com for now.
The comparative cost of the two services is close. Netflix charges $8.00 a month, versus a $79.00 year-long subscription fee for Amazon.com. But for Amazon.com members, there’s the extra benefits, including unlimited free two-day shipping on goods and free access to the “Kindle Owners’ Lending Library” that has over 300,000 e-books that can be borrowed.
But what it will come down to is not only the movie offering, but the special programming that can be viewed only on one or the other’s service, according to my stock analysis.
The chart below shows the recent outperformance of Netflix (shown in the red candlesticks) over Amazon.com (indicated by the solid green line), based on my technical analysis.
Chart courtesy of www.StockCharts.com
It will be a fierce battle online, but given the size of Amazon.com and its membership base, I would probably give the edge to Amazon.com in the long run, based on my stock analysis.